In August 2018, the FASB issued ASU No. 2018-13, “Fair Value
Measurement (Topic 820): Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value Measurement.” ASU No.
2018-13 removes certain disclosure requirements related to the fair
value hierarchy, modifies existing disclosure requirements related
to measurement uncertainty and adds new disclosure requirements.
ASU No. 2018-13 disclosure requirements include disclosing the
changes in unrealized gains and losses for the period included in
other comprehensive income for recurring Level 3 fair value
measurements held at the end of the reporting period and the range
and weighted average of significant unobservable inputs used to
develop Level 3 fair value measurements. ASU No. 2018-13 was
effective for the Company beginning on January 1, 2020. Certain
disclosures in the new guidance will need to be applied on a
retrospective basis and others on a prospective basis. The adoption
of ASU No. 2018-13 did not have a material impact on the Company’s
financial position, results of operations and liquidity.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and
Other (Topic 350): Simplifying the Test for Goodwill Impairment”,
which eliminates the requirement to calculate the implied fair
value of goodwill, but rather requires an entity to record an
impairment charge based on the excess of a reporting unit’s
carrying value over its fair value. This amendment is effective for
annual or interim goodwill impairment tests in fiscal years
beginning after December 15, 2019. The adoption of ASU No. 2017-04
did not have a material impact on the Company’s financial position,
results of operations and liquidity.
In June 2016, the FASB issued ASU No. 2016-13, “Financial
Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments.” The accounting standard changes
the methodology for measuring credit losses on financial
instruments and the timing when such losses are recorded. ASU No.
2016-13 was effective for fiscal years, and interim periods within
those years, beginning after December 15, 2019. The adoption of ASU
No. 2016-13 did not have a material impact on the Company’s
disclosures, financial position, results of operations and
liquidity.
The Company has three
operating and reportable segments: (i) Monster
Energy® Drinks segment (“Monster Energy® Drinks”), which is
primarily comprised of the Company’s Monster Energy® drinks and
Reign Total Body Fuel® high performance energy drinks (ii)
Strategic Brands segment (“Strategic Brands”), which is primarily
comprised of the various energy drink brands acquired from The
Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s
affordable energy brands, and (iii) Other segment (“Other”), which
is comprised of certain products sold by American Fruits and
Flavors, LLC, a wholly-owned subsidiary of the Company, to
independent third-party customers (the “AFF Third-Party
Products”).
The Company’s Monster Energy® Drinks segment generates net
operating revenues by selling ready-to-drink packaged energy drinks
primarily to bottlers and full service beverage
bottlers/distributors (“bottlers/distributors”). In some cases, the
Company sells directly to retail grocery and specialty chains,
wholesalers, club stores, mass merchandisers, convenience chains,
drug stores, foodservice customers, value stores, e-commerce
retailers and the military.
The Company’s Strategic Brands segment primarily generates net
operating revenues by selling “concentrates” and/or “beverage
bases” to authorized bottling and canning operations. Such bottlers
generally combine the concentrates and/or beverage bases with
sweeteners, water and other ingredients to produce ready-to-drink
packaged energy drinks. The ready-to-drink packaged energy drinks
are then sold by such bottlers to other bottlers/distributors and
to retail grocery and specialty chains, wholesalers, club stores,
mass merchandisers, convenience chains, foodservice customers, drug
stores, value stores, e-commerce retailers and the military. To a
lesser extent, the Strategic Brands segment generates net operating
revenues by selling certain ready-to-drink packaged energy drinks
to bottlers/distributors.
The majority of the Company’s revenue is recognized when it
satisfies a single performance obligation by transferring control
of its products to a customer. Control is generally transferred
when the Company’s products are either shipped or delivered based
on the terms contained within the underlying contracts or
agreements. Certain of the Company’s bottlers/distributors may also
perform a separate function as a co-packer on the Company’s behalf.
In such cases, control of the Company’s products passes to such
bottlers/distributors when they notify the Company that they have
taken possession or transferred the relevant portion of the
Company’s finished goods. The Company’s general payment terms are
short-term in duration. The Company does not have significant
financing components or payment terms. The Company did not have any
material unsatisfied performance obligations as of June 30, 2020
and December 31, 2019.